Key issues for Japan’s economy as BOJ monetary easing stays

TOKYO (AP) — Japan’s central bank issued an upbeat assessment of the world’s third-largest economy when it wrapped up its final meeting of the year Tuesday by keeping its ultra-lax monetary policy unchanged.

While the U.S. Federal Reserve is raising interest rates as the U.S. recovery gains momentum, Japan is still struggling to pull out of a slow-growth rut. The BOJ’s assessment of the economy said exports, investment and industrial production had shown signs of improvement.

Structural factors such as low productivity and a shrinking population are hindering the recovery, and BOJ Gov. Haruhiko Kuroda has called for broader economic reforms and government spending to supplement his monetary policy “bazooka.” Here are a few key indicators:

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GROWTH: Japan’s economy grew at a 1.3 percent annual pace in July-September, the third straight quarter of expansion but below most economists’ forecasts. Quarterly growth was 0.3 percent. By comparison, the U.S. economy expanded at a 3.2 percent annual rate in the last quarter.

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TRADE: Japan’s exports fell 0.4 percent from a year earlier in November. That was better than forecast and the smallest decline in over a year. Mostly it was due to a weakening in the Japanese yen, which has lost value as the U.S. dollar surged after Donald Trump was elected president.

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INFLATION: The BOJ said Japan’s consumer price index would likely remain at zero or slightly negative for now, well below a 2 percent target set nearly four years ago. At the same time, surging costs for health care and fresh vegetables are causing consumers to hold back on spending.

INCOMES: Real incomes have been falling or flat, as employers resist raising wages out of fears they would be locked into higher labor costs in a downturn.

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INVESTMENT: A weaker yen can boost earnings of Japanese companies that get a large share of their profits overseas. So far, however, strong profits have not resulted in a surge in corporate investment, which has been at best modest and often flat or slightly negative in the past year.

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WILD CARDS: Apart from the slowdown in growth in key export markets like China, uncertainty over the outlook for global markets, the economy and trade once President-elect Trump takes office; Britain’s plans to leave the European Union and broader geopolitical crises are also potential risks, the BOJ said.